The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Argonaut Gold Inc. (TSE:AR); the share price is down a whopping 84% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. We note that it has not been easy for shareholders over three years, either; the share price is down 80% in that time. Even worse, it’s down 13% in about a month, which isn’t fun at all. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
View our latest analysis for Argonaut Gold
While Argonaut Gold made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we’d consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.
In the last year Argonaut Gold saw its revenue grow by 1.9%. That’s not a very high growth rate considering it doesn’t make profits. Nonetheless, it’s fair to say the 84% share price implosion is unexpected.. We’d venture this growth was too low to give holders confidence that profitability is on the horizon. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Argonaut Gold in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 4.0% in the twelve months, Argonaut Gold shareholders did even worse, losing 84%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand Argonaut Gold better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Argonaut Gold (at least 2 which shouldn’t be ignored) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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